Can you afford to live in Chile????

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Can you afford to live in Chile????

Postby admin » Mon Jan 14, 2013 1:18 pm

You know the very, very first book I ever read on being an expat was when I was about 12 years old called "how to live in Mexico on a dollar a day". It was written like in the earl 70's or so. A real expat classic. I was reading it because my father was reading it. Even in the mid 80's, it was fairly helpful, even though it was very dated by then. He decided to move to Mexico after reading it, and that is how I became an expat at 12 year old. I thought it was great. My $5 a week allowance really went far in those days. I could go eat out, party all week with the college girls, rent boogie board on the beach, and still have a couple dollars left over at the end of the week. The college girls did not know I was 12, and I sure was not going to tell them.

So, we had a strange incident recently that got me thinking about this question. Someone contracted us to help start the move to Chile, handle the immigration to Chile and so on. They started the process, then changed their mind. It happens. The reason however they changed their mind was because it was too expensive to live in Chile. That was not all that strange either. It happens too. However, they then tried to accuse us of not telling them how expensive it was. Seriously?

It was mostly a case of buyer remorse trying to get their money back for services we had already spent extensive time and resources providing.

By the way, in this particular case, we did repeatedly question if they had sufficient money to really move to Chile, even though that is not really our job. As adults, before you move to another country, and even contact us, we kind of assume you have given some thought to the very first question that everyone must ask, 'can you afford to move to that country'?

We are totally happy to answer questions along those lines, just when you reach the point of pulling the trigger and contract us to assist with moving, you should be very clear at that point about your personal financial implications of moving to another country. At the end of the day, it is your decision and responsibility; not ours.

However, just in case, I thought it appropriate to open a dedicated thread on the subject.

Now, I know, that it is totally possible to grab a backpack and arrive in another country with a $1 in your pocket on a one way ticket. I have done it multiple times myself. It does take a special skill set, and a lot of figuring things out on the fly. It can be done however; but for MOST people they lack that special skill set, have various other needs and requirements, have family, and so on. Most people will need some money to make it in any country, and definitely in Chile. The question is, just how much money will you need to get going?

Thus, this thread.

I am not talking about the long-term expat that has figured everything out, and has been in Chile and really could get by a dollar a day mas o menos (not even sure that is possible). I am talking that initial year or two when you are arriving in Chile.

The rule of thumb we have applied for years, just for immigration purposes, has been $1,000 US per person in the household for the first 1-1.5 years. I kind of came up with that number about 6 or 7 years ago, in a back of the napkin calculation, to make sure that immigration would never question one of our client's applications in terms of resources to survive in Chile. Many of course over the years have questioned if that number was a hard number, could it be done for less, and so on. Sure. It was just a starting point for immigration only, and in reality you could live in Chile cheaper at that time. You can still, if you know what you are doing.

However, of the last few years that really has become a much more realistic day to day practical number. Of course everyone's circumstances are different, you might really get some economies of scale out of say a family of 5-6 people or 10 people; however, in the first year or two, that is not far out there, even for large families now.

So, I am going to throw out some hypothetical but pretty typical case of a budget to expect in your first year. Yes, the numbers could be different for a whole lot of reasons, and I invite people to post their own hypothetical cases or real budgets through the thread. Please keep it however restricted to the first two years in Chile. We want the Chile start-up costs.

The hypothetical family:
Family of 4, wife, husband, two kids about 9 and 10 years old, and one dog. There goal to buy a house with a yard and settle for the long-haul somewhere in Chile with a bit of an expat community around, not necessarily Santiago, but not in some run down dumpy town. Husband might start a buisness later or something. For now, they would just like make the move.

My rule of thumb budget is they need $4,000 US a month, over 2 years, or about $96,000 US, $48,000 US a year, or about $23 million pesos a year calculated at about 480 pesos to the dollar (that was close to an average exchange last year) .

Many people will go, that is way to much money; but, is it really? Let's see.

Here would be a breakdown, of some of the one off and recurring costs I believe this family will expect to encounter in their first two years:

Exploratory trip to Chile, say 2-4 weeks (pretty typical first visit): $4,000 - $8,000 US (this would be the best money spent of all of it)

It's a go. They decide to pull the trigger, going to need immigration paperwork. Family of 4, legalization of marriage certificates, birth certificates, and so on, let's call this about $1,000. Don't forget diploma legalization, translations, and so on. Dog needs some papers to travel also. I am assuming they are doing this all themselves. They did not hire us or anyone else to help them out. That would bring this cost up, but I don't want to muddy the waters with our own prices. Let's say they read the forum, and think they got it all figured out.

comments -----This is all aside from whatever wrapping up costs they might have back home, such as selling a house, liquidating things, and so on. Family with kids, they are likly taking a hit somewhere.

Main arrival to Chile: $5,000 - $10,000 US (flights, first days of hotel, extra luggage, got a dog to ship, and so on).

Shipping a container of household goods: $3,000 - $5,000 US (depending on what and how they ship, does not count shipping screw-ups), expecting to qualify for the $5,000 tax free import, so they ship before they leave. We will ignore any taxes above the tax free amount for now, just for simplicity. With a family of 4, it could be a lot.

comments ------here we are, their first day in Chile, and a big chunk of the first year annual budget is gone.

Housing ----- Going to need temp housing. Let's call that a cabin or apart hotel, nothing special, with a kitchen, 40,000 pesos a night, for 2-4 weeks while they find something more permanent. Let's call this one a cost of about 1 million pesos with eating out, buying a few things to get by in an apart hotel with a kitchen, and so on. A hotel would be even more expensive, we could triple this cost easily.

Longer term, but temporary rental for a year ----- So they run around and decide they need an apartment. 2 kids and dog, so they are going to spend 500,000 - 600,000 pesos a month (really conservatively, this could be a million plus pesos easy). We have 1 month deposit (let's ignore the land lords that want more for gringos for the moment, or that want the full year, they get lucky). 8 million pesos for the first year in rent.

let's buy a car ---- Here we go. they need to get around. 4 people and dog. After spending say 20,000-40,000 a day on moving the family in taxis and such, a car is starting to look really cheap. They are staying a long time, so they are going to buy a new car, they do not want to worry about the problems of used car. They could get away with something like a 8 million pesos sedan, but realistically to get out and really see the country, move, and everything else they need to do, they need an SUV. So, they drop about 12 million cash on an SUV (about as cheap as your going to get in Chile, good deal, they got lucky). This could easily be 16 million and up. As this is a long-term investment, let's itemize that over the two years rather than just one year budget.

Insurance ----- Insurance for the house. Insurance for the car. health insurance for the family. As they are new to the country, it is common for insurance companies to make them pay the full 12 month contract because they do not have residency yet nor a bank account. Let's call this 300,000 a month for health insurance for the family (wife is in child bearing years, much higher rate), 3,600,000. Let's call a full car insurance (strange roads, driving laws, new car, and so on), 432,000 pesos for the year. House insurance, let's call that another $300,000 pesos.

So, here we are, well at or over the $23 million pesos budget for the year or $48,000 US for the first year. We still need to buy a house. We still need to put the kids in school. They still need to furnish a house, because they only brought some of their stuff from back home.

We still need..... We still need, and nothing has really gone wrong in this budget yet. The car did not turn out to be lemon. The shipping went o.k. Immigration did not reject their application, and so on. No one in the family back home got sick, and so no emergency trips back in the middle. The bottom did not suddenly drop out of the exchange rate. This is the totally sunny day budget for this family. What about the storm clouds?
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
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From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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nwdiver
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Re: Can you afford to live in Chile????

Postby nwdiver » Mon Jan 14, 2013 2:53 pm

admin wrote:We still need..... We still need, and nothing has really gone wrong in this budget yet. The car did not turn out to be lemon. The shipping went o.k. Immigration did not reject their application, and so on. No one in the family back home got sick, and so no emergency trips back in the middle. The bottom did not suddenly drop out of the exchange rate. This is the totally sunny day budget for this family. What about the storm clouds?






I haven’t met an expat that doesn’t go home for the first Christmas, some never return.
Tickets at Christmas time bought in Oct/Nov $8,000 USD.
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Re: Can you afford to live in Chile????

Postby admin » Mon Jan 14, 2013 2:59 pm

Yea, we still have not fed 4 people for year. Anyone want to post that budget? Let's assume they don't eat out unless they really really have to such as their first month before they get their apartment.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
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Re: Can you afford to live in Chile????

Postby admin » Mon Jan 14, 2013 3:17 pm

O.k. let's buy a house. Needs to be relatively nice location, or what is the point of moving to Chile. We could call it something on the coast, perhaps the lakes region. Needs a yard for a dog, so apartments are out. Does not need to be directly in prime tourist area, but nice area to live and their should be some cafes, bars, and such with a few expats around so they don't feel so isolated. We are down to about 30-34 locations in Chile that fit that description,

Internet and kids schools are an issue. Hard to live in the country too far from town. We are now down to about 12 major locations.

So, they are on the edge of some popular tourist town / city / destination, looking at houses in some sort of development. No ticky tacky track homes with 10 square meters of back yard, and all the houses looking exactly the same.

Boom!!! there goes the budget, 100 million pesos + to get them in the game (US $200,000), with a 2,000-3,000+ square foot house and a 5,000 square meter lot, in a gated community. When all the transactions fees are done, agent, lawyer, notary fees, registry fees, moving in, and so, they are more or less in to 120-130 million pesos (260,000 pesos). Let's say they got another 5 million to 10 million in just costs running around to find and negotiate the right house.

Don't forget the common expenses however. Let's say they are in good shape with a well run community, they are looking at about 200,000 a month in common expenses (often way, way higher). 2,400,000 a year.

ohh, we are so far past my $1,000 US a month x number of people in the family, let's trim it back a bit.

Forget the house. They can not afford a house, or let's say this is an aside to the budget as they have a nest egg from selling their house back home separate from their moving costs. The house is on the house, and at least it something that is not depreciating. First thing in the budget that might pay for itself.

Still common expenses are likly part of show, regardless if they rent or not. So, let's leave the common expenses in this budget.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
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Re: Can you afford to live in Chile????

Postby admin » Mon Jan 14, 2013 3:30 pm

I don't know. I would say better than 60% of our in country relocation clients (we have a lot of clients that have nothing to do with relocation, or were already living in the country) fall in to that category, as the other 40-50% have not been here that long. The critical deciding factor I would say about all of them that have been here longer than 5 years is money. The other deciding factor is international experience.

Sounds like we are giving cancer survival rates.
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Re: Can you afford to live in Chile????

Postby admin » Mon Jan 14, 2013 3:40 pm

I kind of like to think of it more like the stats they gave for fighter pilots in wwII. I read somewhere that if a fighter pilot in wwII survived their first air battle, they had something like a 90% chance of surviving the war. No idea if that is true, but seems to apply to expat relocations. If people survive their first 2 years and are able to adjust and gain the experience, they tend to stay for years. It is the first two years or so that will make or break an expat relocating to Chile. Well, just about anywhere, but Chile especially.

I talk to expats that have been here for 10 or 20 years all the time. Long before we were in biz. What I don't know is for how many made it past 5 years, how many turned around and left for each that made it. Especially, in the numbers of people that made it when they did it all on their own. Obviously, none of us are likly to cross paths with the failures and find out why they failed to make it. The only ones I have to work with are either the stories on the forum or the ones we handled. Money will most likly always be the deciding factor amongst them when pressed, and of course few of them go anywhere but back home.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
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From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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Re: Can you afford to live in Chile????

Postby admin » Mon Jan 14, 2013 3:42 pm

Actually, I take that back now that I think about it. We do encounter a lot of failed expat relocations that did it all on their own, when they are in exit and liquidation phase of leaving. However, we run in to a lot more failed investment plans than failed relocation plans. People that really had no intention of moving to Chile, but just came to Chile with a buisness idea that went south and they were making a strategic retreat and we were hired to clean-up the mess as they leave (e.g. selling properties, dealing with lawsuits, and so on).
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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Re: Can you afford to live in Chile????

Postby wiscondinavian » Mon Jan 14, 2013 4:03 pm

ratbert wrote:
nwdiver wrote:

I haven’t met an expat that doesn’t go home for the first Christmas


You never met me, and I expect you would not want to.

But you bring up what ought to be a poll of some sort: "What percentage of unsponsored non-Spanish-speaking expats last for five years?" (And "why?"). Wherein sponsored would mean long-established family/business/close friends in-country. Wildly speculating: fewer than one in ten of the unsponsored who arrive and attempt to settle will make it to 5 years. For some I suspect it's the cost, for others, well, there are plenty of other reasons.


That poll sounds logistically difficult because of a lot of people who "only planned on being here for a short period of time but ended up staying for a long time because they found a "sponsor" (aka Chilean significant other) or couldn't find work back home or just wanted to stay put for a while."

Of course, a 25-ish-y-o coming here is significantly different than a 45 or 60yo.

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Re: Can you afford to live in Chile????

Postby sandrab » Mon Jan 14, 2013 4:41 pm

Interesting post :) wish I read it 3 yrs ago lol.
I will try to put together how much it has cost 2 people and 2 dogs so far to get here, settle in, and stay for 2 1/2 yrs.

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Re: Can you afford to live in Chile????

Postby picalena » Mon Jan 14, 2013 10:56 pm

I thought I read it pretty closely, but didn't see these, but may have missed them:

- cost of schooling for the 2 kids
- cost of nana and gardener (maybe that is included in housing)
- cost of heating if they live somewhere cold

This is a good thread. A really good topic.

pl
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Re: Can you afford to live in Chile????

Postby Sri Swami Muktanand » Mon Jan 14, 2013 11:11 pm

Also, yoga mat cost is missing.
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Re: Can you afford to live in Chile????

Postby MatthewNZ » Tue Jan 15, 2013 12:08 am

Interesting thread. Like many on this forum, I'm interested in Chile because I'm married to a chilena and have visited many times. We live in NZ, but there have been many times (usually after a sh!tty day at the office) when I've considered relocation. This forum lets me indulge the grass-is-greener fantasy.

Admin, your scenario assumes one would basically want to replicate a comfortable middle class lifestyle in an Anglo/Western Euro country in Chile. This is a worthwhile goal, but in trying to achieve it in Chile think about how difficult it is to establish that kind of lifestyle in a western country, where it is probably much easier. This leaves a move to Chile only making sense if:
- you have a special skill/business venture and will make loads of cash in Chile (which presumably gives you a relocation package, and so you wouldn't fall into your scenario)
- you are so rich you can do what you want

Let's face it, for most people they would be better off living and working in the West and just taking holidays in Chile. Maybe buying a holiday apartment if they are really committed. As bad as things are in many Western countries (I don't doubt that many countries are badly governed and their economies have serious problems), life isn't so bad that relocation to a country in the developing world can be justified (although I may revisit this view in 10 years or so...) Of course, people fall in love or make irrational decisions or can't escape the allure that life may be different (better) in a different country, so they make the move to Chile, not matter how difficult or expensive that decision may turn out to be.


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